It could be that many Australian grain farmers are soon to have another fine season; underpinned by the separate or combined forces of high grain prices and favourable yields. What’s the evidence to support that statement?

Firstly, when Russia, the world’s largest wheat exporter, invaded Ukraine, the world’s fourth largest wheat exporter; it caused a cascade of problems that inevitably will support high wheat prices for months. Ukrainian access to its key southern ports from which it cost-effectively exports its wheat is no longer possible. Moreover, the size of the Ukrainian winter wheat crop harvest this year will be markedly less, as field operations that would normally support usual yields are no longer feasible. Ukraine’s main farm group is forecasting 18.2mmt of Ukrainian wheat production in 2022-23, a 15mmt drop from the 2021-22 crop year.

Secondly, sanctions against Russia have made shipping wheat out of Russia problematic and expensive. Moreover, actions by Russia, China and global reactions to Russia have led to globally higher prices and reduced availability of cropping inputs (fertilisers, fuel and herbicides), so farmers elsewhere can’t cheaply and readily increase their wheat production. A caveat, however, is that Russia and the EU are still expecting large wheat harvests in 2022-23.

Thirdly, the world’s largest wheat producer by far, China, looks set to perhaps have an average year. In mid-March 2022, China’s Minister of Agriculture and Rural Affairs indicated a possible 20% reduction in China’s wheat production as heavy rainfall during planting had reduced plantings by a third. China’s annual wheat production normally is the largest in the world, three times that of the USA’s and almost 80% larger than that of Russia. However, since that poor start the government in April 2022 rated 86 percent of the crop as fair to good versus 97 percent last year. Once again China may need to import wheat in 2022-23, perhaps from Russia, as the world’s second largest wheat exporter, the USA is on the brink of experiencing drought (Figure 1). The U.S. winter wheat crop has the worst ratings in 30 years.

Fourthly, and by a huge contrast, many grain-growing regions in Australia are already set up with ample stored soil moisture to support reasonable and perhaps high crop yields in 2022. Many parts of NSW, Qld and Vic, plus SA’s Eyre Peninsula and some key grain-producing parts of WA, have historically high amounts of stored soil moisture (Figure 2) to support subsequent crop growth in 2022.

Fifthly, wheat prices are at an historic high (Figure 3) and are likely to remain so for many months; so farmers can readily avail themselves of this price upside.

Figure 3: Wheat prices since 2017(in USD per bushel) up until end of April 2022

Key take-away: Many Australian wheat growers seem poised to experience another fine year in 2022.